TECH TUESDAY is a weekly content series covering all aspects of capital markets technology. TECH TUESDAY is produced in collaboration with Nasdaq.
What will options market technology look like in 2030?
That was a key discussion point at SIFMA’s Listed Options Symposium, which was held in New York earlier this month.
From a big-picture standpoint, panelists noted two enduring focuses for options market operators and participants: the provisioning of liquidity and the importance of technology. These points are interrelated and timeless in that they’re as important today as they were in the 1990s – and will be in 2030.
Reekiran Kahlon, Senior Vice President of North American Markets Technology at Nasdaq, spoke with Traders Magazine about options technology following the industry event.
“Options market systems have always been at the leading edge of technological innovation due to continuous demand of high throughput and ultra-low latency,” Kahlon said. “These innovations have been the foundation of numerous advanced feature functionalities implemented in these markets.”
“The level of excellence required for these systems as it relates to performance and resiliency underpins the markets,” Kahlon said. “This enables participants to send their order flow with confidence, knowing that the systems will handle their orders with low response time and in a deterministic manner.”
More than one SIFMA symposium participant noted that the focus of technology development is shifting, from a strong, long-term emphasis on execution and throughput, to more attention on resiliency, security and scalability. Execution and throughput remain vital, but resiliency and the underpinnings of the market need some attention and resources to catch up.
Cloud will see more widespread adoption in options markets by 2030. That technology has been more of a gradual rollout, as market operators and infrastructure providers ensure that delivering computing services via the internet conforms with evolving regulation.
“As we look toward the future, technology will continue to pave the way to new opportunities,” Kahlon said. “We believe it’s a seminal moment to move markets to the cloud and bring the cloud together with the major technologies of the financial industry. Cloud technology allows market operators to scale efficiently in response to increasing capacity requirements.”
Another aspect of the tech evolution will be more automation and systemization of manual processes. One benefit will be enabling market operators to provide straight-through processing for more options trades.
Ultimately, technology in the options market is critical for its ability to make large institutional trades more efficient. SIFMA symposium participants highlighted two applications of this, both of which should improve by 2030: providing market participants with a clearer understanding of block liquidity and making the display of liquidity less burdensome for option market makers.
